If a company's long term solvency/financial leverage increases. Is it bad or good?

It's good for a company if its long term solvency increases.

However, increased financial leverage can be either good or bad. Let me give you an example of leverage involving real estate. There's a house for sale for $100,000. You:

Pay $100,000 in cash. There's no leverage. If the house goes up in value by $1,000, you've made 1% on your investment. But the house is all yours.

Put 20% down, or $20,000. Now there's leverage. If the house goes up in value by $1,000, you've made 5% on your investment ($1,000 on $20,000). On the other hand, if the value of the house declines by 20% (to $80,000), you've lost your entire equity in the property. You still own it, but you have no equity.

Put 5% down, or $5,000. Now there's a lot of leverage. If the house goes up in value by $1,000, you've made 20% on your investment ($1,000 on $5,000). That's very good. On the other hand, if the value of the house declines by only 5% (to $95,000), you've lost your entire equity in the property.

So: The more leverage you have, the greater the "bang for the buck." But the riskier it is.

Hope that helps.